As Thailand advances its commitment to sustainable development and economic liberalization, two pivotal regulatory developments are poised to significantly influence the mergers and acquisitions (M&A) landscape: (1) the introduction of landmark ESG-related bills—the Clean Air Management Bill and the Climate Change Bill, and (2) the Cabinet-approved amendments to the Foreign Business Act (FBA). These legislative shifts reflect Thailand’s dual emphasis on environmental governance and openness to foreign investment, both of which carry significant implications for corporate transactions.
ESG Legislation: Clean Air and Climate Change Bills
In response to escalating public and international pressure to address air pollution and climate change, Thailand’s government has prioritized two pivotal pieces of legislation:
1. Clean Air Management Bill
This bill aims to establish a comprehensive legal framework for air quality control. It will impose explicit obligations on pollution emitters, including industrial facilities, agricultural burning, and vehicle emissions.
Notably, the government may implement an emissions cap and adopt the “polluter pays” principle, alongside economic instruments such as pollution charges and emission permits. The bill is currently undergoing its second reading in the parliamentary review process, with expectations for enactment later this year.
2.Climate Change Bill
This proposed law seeks to institutionalize Thailand’s commitment to achieving net zero greenhouse gas emissions by 2065. It outlines governance mechanisms to manage climate-related risks and introduces policy tools such as a domestic Emissions Trading System (ETS) and potential carbon taxation. Large emitters will likely face mandatory disclosure obligations, emission caps, and compliance requirements aligned with international sustainability standards.
These ESG laws significantly raise the bar for environmental compliance, due diligence, and risk assessment in M&A transactions. Buyers will need to consider long-term exposure to climate regulation, operational costs of compliance, and ESG performance as part of their valuation models. Target companies operating in pollution-intensive sectors may see increased scrutiny or reduced valuations due to potential liabilities.
Foreign Business Act (FBA) Reform: Unlocking Investment Opportunities
On April 22, 2025, the Thai Cabinet approved in principle amendments to the Foreign Business Act B.E. 2542 (1999), signaling a strategic shift from a traditionally protectionist approach toward enhancing national competitiveness. The Ministry of Commerce has been tasked with drafting the proposed amendments, which focus on several key areas:
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- Relaxation of Foreign Equity Caps: The current foreign equity limit in certain non-strategic sectors may be reconsidered, with potential increases to allow greater foreign participation—particularly in industries that support Thailand’s broader economic development goals.
- Simplification of Licensing Procedures: The process for obtaining a Foreign Business License (FBL) is expected to be improved with efforts to enhance transparency, set clearer timelines, and create a more facilitative environment.
- Review of Restricted Business Sectors: Several businesses currently on List 3, which requires an FBL, will be adjusted.
These proposed reforms—particularly the easing of foreign ownership limits and streamlined licensing—could facilitate greater foreign-led acquisitions in sectors newly opened to investment. Nevertheless, it remains essential for potential acquirers to closely monitor the implementing regulations and carefully assess the scope of permissible activities under the amended FBA framework.
Conclusion
Thailand’s concurrent advancement of ESG legislation and FBA reform represents a transformative period for the country’s regulatory landscape. These developments are set to reshape the M&A dynamics by imposing more rigorous environmental compliance requirements and simultaneously offering expanded opportunities for foreign investment.
For more information, please get in touch with our corporate and M&A practice, or alternatively, please contact the author at chai.l@kap.co.th or visit www.kap.co.th
